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Managerial Ethics End Term Exam (Academic Year 2015-16)

Batch: 2014-16

HRM Section C

Nikita Khanna

Roll No H14155

Case 8.3: Vedanta’s Rights on Bauxite Mining in Niyamgiri

Hills, Odisha

Date of examination: 26-Aug-2015

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1. Update the selected case with latest developments (adding references) and justify why you

chose this case in terms of its currency, social impact and critical importance.

1997: London-based industrialist Anil Agarwal’s Sterlite Industries of India Limited signs

memorandum of understanding (MOU) for a mining project with the Orissa government

2002: Land acquisition and a gram sabha notice issued to villagers for the “proposed Lanjigarh alumina

refinery project”. According to the notice, 12 villages would be razed, 60 families displaced and 302

families would lose their farmland when project materialised

2003: Sterlite applied to the Union ministry of environment and forests (Mo EF) for environmental

clearance for the proposed refinery. The application made no mention of the 58.9 ha of forestland it

required

2004: MoEF granted the refinery environmental clearance on condition that Sterlite got mining

clearance before “operationalising” the refinery. The approval letter also stated: “The project does not

involve diversion of forest land.” This, despite the fact that another division of the ministry had

received an application for FCA clearance for the refinery.

2005: In September, CEC recommended to the Supreme Court that mining should not be permitted on

Niyamgiri hill. The report was a scathing indictment of the project and questioned the integrity of the

authorities involved

2006: MoEF’s Forest Advisory Committee (FAC) asked the state sponsored Wildlife Institute of

India for a report, which further issued a study on the impacts of the bauxite mining scheme on forests

and biodiversity in Niyamgiri

2007: Vedanta started one million tonne alumina refinery at Lanjigarh hoping to get bauxite

from Niyamgiri. CMPDIL, according to Vedanta’s lawyers’ statements during Supreme Court hearings

on May 16 and May 18, 2007, cleared the project of all water-related concerns. CEC iterated its stand

that MoEF had acted irresponsibly and with “undue haste” in granting Vedanta clearances

2008: The Supreme Court decides not to follow the advice of the CEC and gives approval to Vedanta’s

forest diversion proposal in Niyamgiri

2009: In-principle clearance for 660.749 ha of forestland for mining was granted on December 11,

2008. Further, in April 2009, forest clearance was given for an additional area of 33.73 ha, despite

widedpread protests.

2010: A four member panel set up by Centre as ordered above found that Vedanta violated forest and

environmental laws in collusion with state officials. Temporary withdrawal of clearance rights by the

MoEF on the recommendations of FAC on August 24.08.10

2013: The SC ordered Gram Sabhas to be held in 12 villages to determine the views of Forest dwellers

on mining. The Vedanta refinery, closed since December 2012, restarted after sourcing raw materials

from other states. The 12th gram sabha held at Jarapa village in Rayagada district also rejected mining.

2014: After rejection of proposal by 12 Gram Sabhas, Environment Ministry issued a letter of

rejection to Vedanta. Vedanta Resources made it clear that it will not look at mining bauxite from the

Niyamgiri hills to feed its Rs 5,000 crore Lanjigarh alumina refinery in Odisha until it gets approval

from the local community.

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Jul 2015: In Niyamgiri hills, paramilitary forces have been branding tribal Kondhs as Naxals which is

being viewed as a deliberate attempt to evacuate the land

Aug 2015: Protests organized across 7 locations in India and Africa against Vedanta with reports that

Modi Govt. is insistent about implementing the project in the name of development

REFERENCES:

http://www.livemint.com/Home-Page/TG5NrTlR5yBbDw8jq3QmpL/Timeline--Vedanta-mine-imbroglio.html

http://www.cseindia.org/node/1680

http://www.banktrack.org/manage/ems_files/download/vedanta_resources_in_niyamgiri_a_project_chronology

http://scroll.in/article/738955/the-dongria-kondhs-of-odisha-now-face-a-more-formidable-enemy-than-vedanta

http://www.ritimo.org/Claiming-Niyamgiri-the-Dongria-Kondh-s-Struggle-against-Vedanta

____________________________________________________________________________________________________

Currency, Social Impact & Critical Importance

It is the duty of the government in a democratic state to uphold the interests of its citizens, especially

marginalised communities, and to enforce the prevailing laws. The Environment Protection Act, the

Forest Conservation Act and the Forest Rights Act were all violated in this scenario, and the Odisha

government promised land to Vedanta without considering the concerns of the locals. The Niyamgiri

Suraksha Samiti claims that it is not only 12, but 160 villages that would be affected by the mining

operations. Granted that there is a rationale which states that natural resources belong to the state

(eminent domain) and that locals cannot veto such issues, especially when economic growth will be

beneficial to the public and will generate employment. However, the locals deserve a say, and it is

hardly fair to uproot them against their will when there are other options for sourcing bauxite;

extending an economic principle to ethics, uprooting them is not the Pareto optimal outcome for this

scenario. The freight equalization policy of the Indian government would help make it less costly for

Vedanta to source bauxite from other sites, and doing so would make business sense for the company

as well, given all the bad publicity this situation has created.

Firms exist to create value, and negative externalities should be minimised. Firms do not exist in a

vacuum; inputs for the firm come from its environment, and outputs go back into the same

environment, thus the firm is inextricably linked with its context. The local community is an

important stakeholder in terms of legitimacy and urgency, but it may lack power when it is a

marginalised community like a tribe in the forests of Odisha. While laws exist to protest these

communities from exploitation, it is the firm’s moral obligation to consider their concerns and

interests while taking any decision that will have an impact on their lifestyle, culture, means of

livelihood, heritage, etc. Governments should protect the rights of the marginalised with extra zeal,

instead of taking advantage of their lack of power.

In the context of today’s concept of a firm, social and environmental responsibility have an important

role to play. Sustainability has pervaded all aspects of business, and the traditional business

organisation has been augmented to become a ‘corporate citizen’. Social and environmental concerns

have been incorporated into all points in the decision making process, from risk assessment (the

Equator Principles) to reporting (the Triple Bottom Line). In line with these expectations, it is justified

to expect the firm not to do any harm to the environment or the community, to take decisions that

serve the well-being of all stakeholders involved, to actively seek out the opinions and concerns of the

community within which it operates, and to undertake actions and pursue outcomes which maximise

social benefit. As for the policy makers, their duty to their people is inherent in the nature of their job.

Economic prosperity should be pursued, but social costs should be minimised in the process.

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AOL 6: Assessing the Morality of Vedanta’s Rights on Bauxite Mining in Niyamgiri Hills,

Odisha by Applying Moral Rules of Deontological and Teleological Justice Ethical

Theories

Moral Judgment: Economic growth at the cost of forced displacement of local communities is

unjustified.

Table 11.5A: Applying Deontological Justice Rules to Justify Vedanta’s Rights on Bauxite

Mining in Niyamgiri Hills, Odisha

Justice

Rules

Ethical Theory of

Deontological Justice

Ethical Rule based on the Ethical Theory of Deontological Justice:

R01 Kantian Formalism:

Act inasmuch as your

act is motivated by a

law that can apply to

all.

Principles of Universalizability: This principle demands impartiality:

do not unto others what you would not have them do to you. The

efforts of the Odisha government and Vedanta to push the clearances

and get the mining operations running at the earliest without giving

the local tribes a chance to be heard can hardly be universalized as

acceptable and applicable to all. One can safely assume these entities

themselves would not stand for such marginalization.

R02 Kantian Formalism:

Act inasmuch as your

act is grounded on

moral reasons that

convince all.

Principles of Reversibility: This formulation affirms human dignity

that resides in rationality, freedom, equality & justice. The theory of

natural rights argues that collective goals of the state such as

prosperity are not sufficient justification for denying individuals their

right. Thus, the relentless pursuit of the mining operations are not

grounded in moral reasons that convince all.

R03 Principle of

Deontological

Justice: Safeguard

economic and social

rights and duties of

the marginalized

Principle of Deontological Justice among the marginalized: This

principle would be clearly & directly violated if the voices of the

tribals were stifled and the industrial & economic interests of the

government and Vedanta were treated as superior. The final decision

of the MoFE has delivered on this principle, something which the state

government itself failed to do, and Vedanta continues to fail to do.

R04 Principle of

Deontological

Justice: Also

safeguard rights and

duties of corporate

executives

Principle of Deontological Justice among corporate executives

involved: When confronted with conflicting rights or duties, it is

moral to act letting the situation with all its circumstances define

whose rights should prevail, however, after giving additional

protection to the rights of the marginalized and underprivileged. Thus,

from a moral responsibility standpoint, the executives were duty-

bound to safeguard the rights of the Dongria Kondh.

R05 Situationanism:

When rights/duties

conflict, the actual

situation should

determine the

decision and

judgment but one

must own the act and

its consequences.

Principle of Existential Situationism: Once again, in a situation

marked by conflicting rights or duties, it is moral to act letting the

situation with all its circumstances define whose rights should prevail,

however, giving additional protection to the rights of the

underprivileged. The situation pits the larger interests of the state for

‘the greater good’ against those of the local tribe, which is an

important stakeholder in terms of legitimacy and urgency, but lacks

power given that it is a marginalised tribe in the forests of Odisha. It

thus follows that the firm and the state are morally bound to uphold

their rights in such a situation.

R06 Existentialism: When

amidst uncertainty,

risk and ambiguity,

Principle of Existentialism: It is important the agent own the

consequences of his/her actions. The Niyamgiri Suraksha Samiti

claims that it is not only 12, but 160 villages that would be affected by

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right or wrong, truth

or falsehood, and

good or evil cannot

be clearly

distinguished, and

then act in the midst

of doubt.

the mining operations. The attempts to underplay the environmental

and social impact of the mining project, in a bid to reap its economic

benefits, does not constitute a justifiable stance in terms of decision

making amidst uncertainty. Risk and return are to be measured not

only in economic terms, but also in social and ecological terms, so as

to respect the rights of the environment & society. Thus,

existentialism does not justify displacing the local tribes.

R07 Legalism: Legitimacy

of government laws

and industry

ordinances

Compliance to legitimately promulgated and enforced

government laws and industry ordinances: The Environment

Protection Act, the Forest Conservation Act and the Forest Rights Act

were all violated in this scenario, and the Odisha government

promised land to Vedanta without considering the concerns of the

locals. Vedanta should not have set up their refinery without obtaining

permits, and the state government should not have made promises

without complying with legal & moral codes of conduct in a bid to

fuel investment. An investor-friendly government may follow the

principles of realpolitik, but the plight of displaced tribal peoples who

continue to suffer from their loss of habitat and livelihood cannot be

ignored, and a more optimal outcome must be strived for.

R08 Contractualism:

Binding capacity of

freely agreed on

contracts.

Compliance to freely agree on contracts: Vedanta encroached upon

forest land without waiting for the final clearance, based only on the

preliminary clearance & the promises of the Odisha government. Even

if one does not take this to be a violation of a contract & gives

Vedanta the benefit of the doubt, that does not lend ethical or moral

authenticity to their actions, given that rights & laws were being

violated.

R09 Parenesis: A Code of

ethics that counsels

and exhorts action.

The obligation is

parenetic or

hortatory.

Is wealth maximization ruled by credible and valid industry and

corporate ethical codes of conduct: Codes of conduct in industry &

mining do not permit flouting of laws or violations of the rights of

local communities, with encroachment upon forest land and

displacement of tribals against their will. In fact, Vedanta’s own code

of conduct emphasizes upholding human rights, compliance with law

& regulations, relationships with stakeholders, and protecting the

environment. Thus, though this code may only exhort & not bind, it is

being violated.

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AOL6: Table 11.5B: Applying Teleological Justice Rules to Justify

Vedanta’s Rights on Bauxite Mining in Niyamgiri Hills, Odisha

Justice

Rules

Ethical Theory of

Teleological Justice Ethical Rule based on the Ethical Theory of Teleological

Justice:

R10 Hedonism:

Satisfaction and

Pleasure of all

(Jeremy Bentham)

Principle of Universal Hedonism: This principle was most definitely

not upheld by the state government & Vedanta in all their efforts to

push for the mining operations to start, in a bid to line the pockets of a

few, at the expense of the well-being of the local community. With

their lifestyle, culture, means of livelihood, heritage, etc being

impacted, it is quite logical that the Dongria Kondh were not satisfied

with their land being encroached upon.

R11a Utilitarianism (J. S.

Mill): Maximize

utility of all

Principle of utility-maximization of the greatest number fulfilled:

This outcome was not being pursued by Vedanta & the Odisha

government either. The benefits of industry & profits reaped from

such an enterprise will line the pockets of a few, majorly UK-based

Vedanta, and the political classes in Odisha. The trickle-down effect is

more urban legend than reality, and the state of the common man in

Orissa only brings this point home. This can perhaps best be explained

by the resource curse (or the paradox of plenty). Myrdal’s theory of

backwash also applies here.

R11b Consequentialism (E.

Anscombe 1920-

2001): Maximally

reduce harmful

consequences to all.

Maximally reduce harmful consequences to all: This rule of

consequentialism was not being adhered to either, given that the

outcome being pursued by the state & Vedanta was producing a gamut

of harmful consequences for the local tribe, while maximizing benefits

accruing to themselves.

R12 Eudemonism

(Aristotle): Principle

of happiness of the

maximum

Principle of happiness of the maximum fulfilled: The happiness of

the state, desperate to promote industrial activity, and that of Vedanta,

happy to exploit the resource rich Niyamgiri Hills for profit, were

most definitely being pursued, but the happiness of the Dongria

Kondh was being subordinated to the agenda of the state & the firm.

Not only were they going to be displaced from their homes, their

religious & spiritual well-being was going to be impacted as well,

given that they considered the hills holy.

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AOL 6: Table 11.6: Assessing the Morality of Vedanta’s Rights on Bauxite

Mining in Niyamgiri Hills, Odisha by Applying Moral Rules Based on

Distributive Justice Ethical Theories

Distri-

butive

Justice

Rules

Ethical

Theory of

Distributive

Justice (DJ)

Ethical Rule based on the Ethical Theory of Distributive Justice:

R13 Formal

Justice:

Egalitarianism

(Canon 1)

Aristotle’s Canon of Equality: Egalitarianism emphasizes equal access to

the goods of life that every rational person desires based on need and equality.

The Dongria Kondh were being marginalized, with their needs & desires

being subordinated to the ‘greater good’ in terms of economic prosperity for

the state. This violates the canon of equality.

R14 Socialist

Justice

(Canon 2)

The Canon of Need: There are other options for sourcing bauxite; the freight

equalization policy of the Indian government would help make it less costly

for Vedanta to source bauxite from other sites, and doing so would make

business sense for the company as well, given all the bad publicity this

situation has created. On the other hand, rehabilitation of displaced tribes does

not have a very good track record in India. As the Dongria leader, Lodu

Sikaka, put it: "We'll lose our self-esteem if they take away our hills and

forests. Other Adivasis [India's tribal peoples] who have lost their homes are

dying of desperation; they are being destroyed. Earlier they used to till their

land but now they are only drinking without working. They have become kind

of beggars." [source]

R15 Naturalist

Justice

(Canons 3 &4)

The Canon of Natural Merit & Ability: This canon emphasizes rewards

based on ability. This canon is not being violated given that rewards are not

being pursued or distributed in a manner that disregards one’s merits. Vedanta

has the ability to mine Bauxite, and refine it into alumina.

R16 Retributive

Justice

(Canon 5)

The Canon of Effort: This canon is not being violated either, as the situation

does not involve rewards that do not recognize relative levels of effort.

R17 Capitalist

Justice

(Canon 6)

The Canon of Productivity: This canon invokes the economic principle of

free enterprise capitalism. This system rewards services rendered, capital

advanced, risks run, and profits generated. Thus, Vedanta & the state were

adhering to this cannon in their efforts to promote the mining project

R18 Libertarian

Justice

(Canon 7)

The Canon of Social Utility: This cannon distributes surplus according to

one’s value to society or the common good. From the point of view of the state

& Vedanta, this cannon was being upheld, given that economic progress &

industrial growth in the state would add to common good. However, this is a

very subjective evaluation. What is common good? Does sacrificing the well-

being of the local tribes in the pursuit of economic growth count as common

good? Moreover, to whom would the surplus really accumulate? Given

Odisha’s history, it is a classic example of the resource curse (or the paradox

of plenty), and the odds that the benefits will actually be reaped by the

common man seem quite bleak based on the current state of affairs.

R19 Libertarian

Justice

(Canon 8)

The Canon of Supply-demand: This canon invokes the economic principle

of laissez faire that defines (socially) useful contributions by the law of

supply and demand. From a purely market-oriented standpoint, Vedanta’s

mining operations make sense, and this cannon was upheld. However, this is

not necessarily moral; how stable and ethical are market-exchange values?

Moreover, the need for state intervention as a means of protecting the rights

of the marginalized cannot be emphasized more in a situation such as this

one. Profit-generating capabilities should not be the only consideration in

such scenarios.

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R20 Individual

Justice

(Rescher)

Rescher’s Canon of Legitimate Claims: Legitimacy of claims goes hand in

hand with an equitable reward system. The claims of the Dongria Kondh are

legitimate, given that they have the backing of the legal system, and they have

the right to their ancestral land from a moral, egalitarian & natural justice

standpoint. The claims of Vedanta are not as legitimate given that they have

no right to the land, and they can source bauxite from elsewhere. The claims

of the government are more legitimate as the state has a say in land related

matters (eminent domain), but the duty of a democratically elected giverment

to its citizens, especially the marginalized, cannot be overlooked.

R21 Fair

Opportunist

Justice

(Rawls)

Rawls’ Equality Principle: An executive action is ethical if it offers all

stakeholders fair opportunity for benefits. The actions that Vedanta wanted to

take in terms of pushing for clearance for their mining operations do not

afford fair opportunities to the local tribes, as the benefit distribution is

skewed in favour of the firm.

R22 Libertarian

Egalitarian

Justice

(Rawls)

Rawls’ Difference Principle: An executive action is ethical if it seeks to

nullify among firm's stakeholders the advantages stemming from the

accidents of biology, geography and history. At first glance, one may see this

principle as being upheld by Vedanta & violated by the tribals, but this

evaluation would be shallow. The right of the tribals to be heard can hardly be

attributed to an ‘advantage’ stemming from an accident of history; this is a

basic human right & is ethically & morally sound in terms of egalitarianism,

natural justice & deontology. On the contrary, the unfair advantage lies with

the corporate giant in terms of muscle power, and the support of the Odisha

government which has been trying to get the clearances from the MoFE to get

the operations started. Thus, strict egalitarianism was violated.

R23 Libertarian

Justice

(Nozick)

Nozick’s Principle of Distributive Justice: This principle relates to justice

in acquisitions & transfer. The relentless pursuit of the mining clearances by

the state & the firm with little regard for the rights of the local tribes, and for

the laws that protect forest land & forest dwellers, violates this principle.

R24 Non-

malfeasance

Justice (USA)

Principle of Strict Liability: The principle of non-malfeasance was also

violated, given that the displacement of the Dongria Kondh would most

definitely cause harm to their emotional, spiritual & social well-being.

R25 Preemptive

Justice

Principle of Preventive Justice: The actions of Vedanta & the state

government were in violation of this principle as well. Not only were their

intentions geared not to prevent harm, they were in fact causing harm, both

ecological & social.

R26 Protective

Justice

Principle of Protective Justice: The Dongria Kondh were not being

protected from harm in the scenario being pursued by the state & Vedanta.

The irony here is that by the very nature of democratic governance, it is the

duty of the state to protect the rights of the marginalized.

R27 Procedural

Justice;

Corrective

Justice

Principle of Procedural Justice and Corrective Justice: The actions of the

firm & the state were not correcting any past injustices, they were in fact

committing one by pursuing their own goals & violating the rights of the

locals to be heard. Justice in the procedure in terms of hearing the locals out,

as well as justice in terms of the outcome where they would end up being

displaced, was not being delievered,

R28 Beneficent

Justice

Principle of Beneficent Justice: It is the duty of the executive not only to

avoid, prevent & protect from harm, but also to actively strive to do &

promote good. As for the state, it is once again inherent in its nature & very

reason for existence that these outcomes be delivered. Once again, alas, this

rule was violated by the state & firm in their pursuit of economic gains.